On the 21st of March, 2024 the United States Department of Justice (DoJ) brought an Anti-Trust lawsuit against Apple, with their complaint shown here with some excerpts as follows:

Unless Apple’s anticompetitive and exclusionary conduct is stopped, it will likely extend and entrench its iPhone monopoly to other markets and parts of the economy…

This case is about freeing smartphone markets from Apple’s anticompetitive and exclusionary conduct and restoring competition to lower smartphone prices for consumers, reducing fees for developers, and preserving innovation for the future.

By maintaining its monopoly over smartphones, Apple is able to harm consumers in a wide variety of additional ways

Whilst there are a great many statements that are factually incorrect and misleading in the DoJ submission, the important issue of question for me initially is simply: by the definition of a Monopoly under the Sherman Anti-Trust Act in the USA, does Apple qualify as a Monopoly at all over smartphones in any dimension?

The summary of what the Act interprets as a Monopoly can be found here but this is the key sentence:

An unlawful monopoly exists when one firm has market power for a product or service, and it has obtained or maintained that market power, not through competition on the merits, but because the firm has suppressed competition by engaging in anticompetitive conduct.

The wording is clumsy, so let’s work this through. If a “Product” is meant literally in the singular sense, a single widget, made identically, from a single supplier under the same name, certified as such by that manufacturer then every widget is a monopoly within itself. If we interpret a “Product” as meaning a “Product Class” or a “Product Type” or perhaps a “Product Category” then if we had widgets of similar functionality and similar design, but supplied by multiple companies that leads to choice for consumers, that is the outcome that we want. If Company A that makes Widget A, finds a way to limit the production of competing products of the same product type, but from other manufacturers, then that could represent a restraint of trade and shows monopolistic behaviour.

Therefore we can only reasonably interpret “Product” in this context as a “Product Type” and the DoJs use of the phrase “iPhone Monopoly” is a non-sequitur and what they meant to say (as they did later in their document) is “Smartphone Monopoly”.

Similarly “Service” can be more correctly interpreted as a “Service Type” and in the context of Smartphones this could include Text or Multi-media Messaging Services, EMail etc.

Next question is does Apple have a Monopoly over Smartphones as the DoJ assert? Globally Canalys showed Apple in Q1 of 2023 behind Samsung and the longer term analysis here suggests that Samsung alone beat Apple in Smartphone sales in 6 out of the 8 quarters in 2022 and 2023.

However since the DoJ is USA focussed Canalys also reported that in the United States in Q3 of 2023 Apples market share had dropped year over year from 57% to 55% by shipments.¹

If Apple’s marketshare is actually about 20% of global smartphones and just over 50% in the US, then can Apple reasonably be expected to have Market Power over the others? Certainly not in the smartphone hardware, but what about the software? In the context of smartphone operating systems, iOS only runs on iPhones (Apple’s only Smartphone). However reflecting on the attempted Anti-Trust Lawsuit against Microsoft with 9 out of 10 computers coming with Microsoft Windows pre-installed at that point in history, Microsoft had a monopoly over the operating system, not the computers themselves.

The better question then is what operating system in the smartphone context is similar to that of the personal computer context of the 90s and 00s. This analysis suggests that Android is maintaining 75-80% marketshare globally, and 40% and growing in the US, with iOS only getting over 20% globally three times in 8 quarters, and about 50% and dropping in the US.

So What?

The problem with this Anti-Trust case is that the wording used and referencing the Act as it stands, will simply lose. Apple is not a monopoly in that sense and if the DoJ were actually interested in smartphone monopolies (globally) they should have gone after Android, although the ownership of Android is rather complicated by Googles design.

What the DoJ Meant To Say

It’s unavailing at this point in time to chide the DoJ for such a poorly understood or written submission against Apple. If I were to extrapolate what they meant to say though, it would be something like this:

All smartphones and personal computers shall be open to install and run applications (apps) at the discretion of the owner and user of the hardware in question.

The fascinating point is that Apple have a split philosophy that’s been talked about for years: on the Mac you can install anything from anyone (though recently SIP, Gatekeeper etc have added more warnings to users about risks of so doing), whereas on iOS devices you can not. Apple cite a litany of reasons to justify their restrictiveness on iOS but it really doesn’t matter what those reasons are anymore for one reason alone: ubiquity has led to reliance.

The Platform Lifecycle

The word “Platform” is intentionally generic since you could argue that the platform for Railroads a hundred years ago was an engine pulling carriages on an agreed width of rails to move people and goods around the country. In this context the Mobile Phone was a platform for voice calling other people and was an extension of the Telephone system. The Smartphone was a platform for transferring information between people and the internet.

Of course you can iterate down that technology stack and identify that the Internet is a platform, as is the landline phone network, as is the mobile phone network.

Each of these platforms have approximately followed the stages of their lifecycle below:

1. Invention
2. Early adoption
3. Competition
4. Ubiquity
5. Reliance
6. Regulation

In the case of railroads in many countries, once technology was invented it was adopted by one company to fund construction of the first rail lines as they identified money could be made. Then more companies built more lines and in some cases governments built some infrastructure as well, with the companies then competing on price. Once rail lines were widespread they had become ubiquitous with practically every town touched by a rail line and station. With this came more commerce and more people began to depend on them for food deliveries, mail, and to get around and the majority of the population came to rely on them.

At this point there were problems in some countries including the United States where one company owned a rail bridge and restricted its competitors from using it. The reliance and pressure from end users forced more regulation into place to prevent monopolistic behaviour from continuing.

In the smartphone market it’s been a similar journey so far, with smartphones now crossing beyond ubiquity into reliance. Why do I say that? Have we become reliant/dependent upon the smartphone? With some online services a smartphone is required for multi-factor authentication to log in. In some businesses contracts require specific messaging apps, based on smartphone platforms only, to stay in touch as part of the job. In some countries, governments are moving away from physical identification to digital identification, held on your smartphone.

Credit and Debit physical cards are becoming less common with the advent of more convenient technologies leveraging PayWave and PayPass such as Google Pay and Apple Pay. Some online banks don’t issue physical cards by default anymore. Finally there are many people that own a smartphone that don’t own a computer, whether that’s a desktop or a laptop computer, simply because smartphones are smaller and cheaper.

With many forms, applications and such today, it’s only possible to fill these in via a web-form which requires a computer or a smartphone, hence the smartphone has indirectly become the required tool for this purpose. Given that they’re being relied upon now, we start down the road of regulation.

It was inevitable.

Was Anti-Trust the Right Approach?

No. Apple does NOT have a monopoly or market power in the smartphone platform space. The better approach would be to follow in the European Union’s footsteps with the Digital Markets Act. Regulation is required but it must equally apply to all entrants in the Market - NOT JUST APPLE.

The interesting question though is that if you’re the inventor of a technology and you can set the design direction from day one, would you do that in the knowledge that in the future, if your technology becomes a ubiquitous platform that is relied upon by the majority of the population, you will be forced to do things against your original design direction by regulation?

Since the smartphone was created about 25 years ago (debates over who invented the first one notwithstanding) then that’s up to two and a half decades of mostly, do-what-you-want until you face regulation.

Maybe that head-start is enough…depending on your point of view of course.

Whether or not the AntiTrust case against Apple goes anywhere useful, it will be followed by more legislation. The DMA will be enforced even more harshly until Apple and other technology companies get the message. The user owns their own device, not Apple, and the user should be free to choose how they want to use it.